Market report

---

It was another good week for the market, with news of the Banque du Caire privatisation and the merger of two of Egypt's largest private banks, Commercial International Bank and Arab African International Bank, stirring enthusiasm. The CASE30 increased 1.5 per cent to end the week at 8470 points, after it recorded its highest ever level of 8520 points at the first trading day of the week. The week ending on 19 July witnessed LE6.8 billion worth of shares changing hands.

On the economic front, statements by the governor of the Central Bank of Egypt, Farouk El-Okda that he expected a further drop in the country's rate of inflation by the end of 2007 from the current eight to seven per cent in August and a further decrease by the end of the year, were encouraging.

ORASCOM TELECOM HOLDING (OTH): The company submitted a tender offer of LE683.8 million to buy 100 per cent of Raya Holding at a price of LE12 per share. RAYA Holding's major shareholders are attempting to withstand OTH's takeover bid and are considering buying shares in the market at a higher-than-market price five days before the end of OTH's offer period. Medhat Khalil, chairman and founder of Raya and owner of four per cent of the company commented on the offer to Reuters by saying "we (shareholders) are not selling any shares in the company, and the price offered in the tender is very naive. There were no negotiations of any kind before the announcement. We have not been contacted by OTH." Raya is owned by a number of local and foreign investors in addition to a 57 per cent free float. IT sector analysts point out that the OTH move aims at gaining control over the market in mobile phone sets which is almost 50 per cent controlled by Raya. OTH's Ring market share retreated to less than 20 per cent after new regional players like Axiom and i2 entered the market.

OLYMPIC GROUP (OG): After signing a deal to be the sole distributor and manufacturer of three Electrolux brands in Egypt starting in 2008, OG acquired Al-Abd Industries, the current Electrolux agent in Egypt. The LE120 million deal also includes the assets and trademarks of Al-Abd Trade Company, a factory for manufacturing Zanussi-Electrolux refrigerators and dishwashers. All Al-Abd's inventories in products, equipment, and commercial contracts will be transferred to OG. Al-Abd Industries is licenced to produce refrigerators and dish washers for Zanussi-Electrolux, but has not yet begun production. An OG press release stated that the acquisition move is intended to minimise the transition period, allowing OG to start immediate production in conjunction with Electrolux International.

COMMERCIAL INTERNATIONAL BANK (CIB): In a surprise move, the CIB announced that there are currently negotiations with the Arab African International Bank (AAIB) to merge the two banks into one entity with an overall eight per cent of the total banking sector's assets. The planned merger is seen to be a part of the plan of the Central Bank of Egypt (CBE), owner of a 49.37 per cent stake in AAIB, to maximise revenues on its investments in addition to setting up a local giant banking entity with a capital of LE5 billion and assets of LE65 billion. Press reports quoted a senior CBE official as denying that the merger aims at buying Banque du Caire (BC), stressing that the planned merger will come into force after the BC's planned offering. AAIB is majority owned by both the CBE and the Kuwait Investment Authority, each holding a 49.4% stake. It is expected that following the merger, the CBE is to divest its stake in the merged entity. The merger and the CBE's divestment are expected to take place before the end of the fiscal year 2007- 08.

MOBINIL: After a year-long debate about whether to apply for a 3G licence or not MobiNil is getting one. The Ministry of Communications and Information Technology has granted MobiNil a high-speed, third-generation mobile licence for LE3.4 billion. The ministry said in a statement that the firm would be able to pay the fees in instalments, as did rival Vodafone Egypt, which acquired a licence in January for LE3.34 billion. While the 3G licence provides operators a frequency of 10 megahertz, the current available frequency with the National Telecommunication Regulatory Authority (NTRA) is only 5 megahertz which means that MobiNil might have to pay only 50 per cent of the licence's value till the other frequency becomes available. MobiNil's CEO Alex Shalaby had announced in June that the company will outgrow its 2G spectrum sooner than expected due to strong growth, a statement that was read as a retreat from his firm stance against getting a 3G licence.

NATIONAL BANK FOR DEVELOPMENT (NBD): The bank sent a release to CASE announcing that its financial consultant, the National Bank of Egypt (NBE), stated that the tender offer submitted by an UAE-based consortium to acquire 100 per cent of NBD at a price of LE11 per share is appropriate.

Compiled by Sherine Abdel-Razek